Stock Exchange Sensitive Index
Also known as S&P BSE Sensex index, is one of the oldest benchmark index of the Bombay Stock Exchange in India.
The term ‘Sensex’ was coined by stock market analyst Deepak Mohoni and is a combination of words ‘sensitive’ and ‘index’.
Sensex comprises of the 30 actively and largely traded stocks on the BSE and is a reflection of the Indian economy’s performance.
The index is reviewed twice every year in the month of June and December and was initially compiled in the year 1986.
A rise in Sensex indicates a general rise in the share prices whereas a decrease in Sensex is a reflection of general decrease in share prices. This way, Sensex helps in gauging booms and busts in the stock market.
The S&P BSE index committee selects the constituents on the basis of the following five criteria:
- They should be listed on BSE in India.
- It should be a large to mega-cap stock.
- The stock should be relatively liquid.
- The revenue should be generated from core activities.
- The sector should be kept in balance broadly in line with the Indian equity market.
How is Sensex Calculated?
Just like Nifty, Sensex is also calculated on the basis of the free float market capitalization method.
Free float is the percentage of the total shares issued by a company that are readily available for trading in the market.
Hence, Free float market capitalization= market capitalization * Free float factor
This means that instead of using the outstanding shares of a company, its float are used.
Some of the companies included in Sensex are: Asian Paints, Bajaj Auto, HDFC Bank, ICICI Bank, Infosys, ITC, Hindustan Unilever, Power Grid Corporation of India, Sun Pharmaceutical, TCS, Tata Steel, Tata Motors, Yes Bank, Vedanta.